Health Law Delay Puts Exchanges in Spotlight

Bill Petersen, owner of an in-home assistance program in South Elgin, Ill., was relieved by the delay in employer requirements.Credit
Nathan Weber for The New York Times

Employees who now have to wait another year to get health coverage through their employer will have little recourse but to buy their own insurance at the newly created state exchanges.

The Obama administration’s decision, announced on Tuesday, to delay for a year a requirement that larger employers provide insurance or pay a penalty has made the operation of the state exchanges — where individuals can shop for insurance starting Oct. 1 — more critical to the success of the new health care law.

The delay is viewed as an unspoken acknowledgment by federal officials of the size of the task ahead, according to policy experts and benefits consultants. By putting off the employer requirements, officials are in a position to concentrate on making sure the state exchanges work.

“The real focus is now getting the individual exchanges and premium tax credits up and running,” said Timothy S. Jost, a law professor at Washington and Lee University who closely follows the new law, known as the Affordable Care Act.

In addition to the creation of the exchanges, the law’s broad market reforms of the insurance industry and the expansion of Medicaid will continue, Mr. Jost said, adding, “I just don’t see this as a game changer.”

Also still in effect is the requirement that people without insurance buy it by 2014 or face fines. Subsidies will be available for people who meet income requirements.

The companies affected by the delay — those with 50 or more full-time employees — were increasingly anxious about their ability to meet the law’s requirements, given the delay by the administration in issuing the final rules for the companies to follow to ensure they were in compliance, said Helen Darling, the president of the National Business Group on Health, which represents employers that offer health benefits.

“This is a recognition that they were not going to meet some key deadlines,” she said.

Companies that employ fewer than 50 workers have already been given a reprieve from the law’s requirements.

Many of the companies being granted the latest reprieve either offered no coverage or provided it only to certain workers — like managers or those working 40 hours a week. Some employers had been expected to pay the law’s penalty of $2,000 a worker for every employee rather than provide insurance, while others said they would go ahead and offer it.

“We don’t know how many people would have gained coverage or won’t because of the delay,” said Paul Fronstin, a senior researcher at the Employee Benefit Research Institute. “It’s not a big deal because it doesn’t affect many people, but it’s a big deal if it affects you.”

A large majority of larger employers — 94 percent — already offer coverage, according to the Kaiser Family Foundation, which studies the market. “We do believe the practical effect of this will be really quite modest,” said Drew Altman, the foundation’s president.

The reprieve will give companies more time to consider what they should do over the next year. Bill Petersen, who owns a franchise of the elder-care business Visiting Angels in South Elgin, Ill., outside of Chicago, for example, does not offer coverage to his 100 full-time employees and had been deciding whether to cut back their hours to avoid the law’s requirement or start providing health benefits.

“It was just a relief to know that we had some time to be able to look at our options and understand the act just a little bit more,” he said.

Others say they plan to proceed with their plans to expand their coverage, although they are waiting for final guidance from the administration before deciding what benefits they will offer. “I still want to stay on the same time line,” said Don Fox, the chief executive of Firehouse Subs, a chain of restaurants based in Jacksonville, Fla. At the company-owned restaurants, only general managers and headquarter personnel are now offered coverage, and Mr. Fox said the company was going to cover the additional 90 to 100 employees required under the law. “I’ve been setting an expectation with our employees,” he said.

Thom Mangan, the chief executive of United Benefit Advisors, described the delay as “a nice gift that the government gave.” He said that companies that employ many part-time and hourly employees would probably delay providing additional benefits in the next year. “They would be crazy not to,” he said.

One of employers’ main concerns was how the law defined which of their workers would have to be covered, and how businesses should treat seasonal and other part-time workers in calculating whether they worked 30 hours or more. “There are still a lot of questions,” said James A. Klein, president of the American Benefits Council. The 30-hour cutoff “doesn’t fit neatly into how people actually work,” he said, and many employers found the regulations very complex.

The law still requires employers who provide coverage to meet the new federal requirements, like offering policies that provide free preventive care.

While the delay “provides some cost relief,” said Tracy Watts, a benefits consultant at Mercer, “there’s still a significant cost being passed onto employers in 2014.” She estimated that the health care law would add an additional 3 percent to the cost of coverage.

Advocates for the uninsured said the delay would have little impact on most of the people who did not have health care coverage. “The key goal is to extend health care coverage to the tens of millions of people who don’t have it,” said Ron Pollack, executive director of Families USA, a liberal advocacy group. He said the bulk of those people would receive coverage through the expansion of Medicaid in many states or through federal subsidies that would help them pay for insurance they bought through state marketplaces. “The employer mandate will have a relatively small impact on extending coverage.”

But the question for many people is whether there will be more delays. Mr. Pollack, for one, did not think so. “I think the key features of the Affordable Care Act that are most helpful to families across the country will be implemented on a timely basis,” he said.

While federal officials have certainly put in place some provisions of the law without delay, there is no question that the adoption of such a large and sweeping set of provisions is complicated, said Mr. Fronstin, the employee benefits expert. “It certainly raises the question of what’s next, because this isn’t the first delay,” he said.